No more sugar sops, it’s up to states for now : Paswan

By Rashmi Sanyal and Stuti Chawla

NEW DELHI: The central government will not dole out any further incentives to the cash-strapped sugar industry this season and the ball is in the states’ court for now, asserted Food Minister Ram Vilas Paswan on the cash-strapped sector’s call for fresh incentives.

“The central government fixes the fair and remunerative price for cane, we have done that, the rest is between sugar mills, farmers and state governments,” Paswan said in an interview to Cogencis today.

The Centre wants to go slow on further sops to keep some ammunition in stock for the next season, when output is seen surging to 28 mln tn, higher than this season’s likely 27.8 mln–an eight-year high. Carryover stock is also seen rising to 9-10 mln tn.

The crumbling financial condition–with the commodity’s prices plummeting to five-year lows due to abundant production and mills’ sugarcane arrears shooting to a record high of over 210 bln rupees–has sent sugar companies knocking at the government’s doors for help.

The central government did pitch in–raising the import duty on sugar and export subsidy on raw sugar, while also approving higher prices for ethanol, a by-product, sold to fuel retailers for blending in petrol.

The incentives seem inadequate and the industry now wants more. It is urging the government to create a sugar buffer, dole out sops for export of white sugar and approve more soft loans.

“We have not taken a decision yet on creating the sugar buffer,” he said.

The industry has been asking the government to buy 10% of India’s total sugar output through the Food Corp of India, a move that could push up prices and, in turn, help companies get better realisations, the minister said.

“It can be done… (but) the central government will do nothing now… The sector has been decontrolled,” the minister reiterated.

“It is a matter for the state government. To help cane farmers, we have already announced (raw sugar) export incentives, raised the import duty, given soft loans, and also announced 10% ethanol blending… We have done all this,” Paswan said.

The industry has also been asking the government to extend the subsidy on export of white sugar. “We have not taken any decision on that as well,” the minister said.

In February, the government had announced a subsidy of 4,000 rupees a tn on the export of raw sugar, but the move has not really helped the industry, as exports have been negligible due to weak global sugar prices.

A�Pulse on Pulses

The food ministry is closely monitoring the rising prices of pulses in the country, Paswan said, stressing the need to balance the interest of both the farmer and the consumer.

“If we import (which we do), farmers are unhappy as it depresses local prices, pulling down realisations for them. Farmers say they would only be encouraged to produce more if they get better returns. On the other hand, if prices are up, consumers are unhappy. So there is a need to balance both,” Paswan said.

The minister said the finance and commerce ministries have been kept in loop about rising prices.

Also, as part of policy, duty-free import of pulses is allowed and state-owned trading houses would be asked to source them as and when required.

Prices of all kharif pulses have hit historical highs over the past few months due to a supply crunch in the wake of a sharp fall in domestic output last year. Output was hit due to deficient rains during the monsoon season, and heavy, unseasonal rains during harvest time.

Tur prices have risen 80% over the last one year to a record high of 7,400 rupees per 100 kg. Similarly, moong prices are 75% higher, and urad up 55% to the current level of 8,000 rupees per 100 kg each.

A�Food Security

Paswan said the government is trying hard to roll out the food security plan across the country in the face of increased reluctance on the part of states.

“In many states like West Bengal, Kerela, Madhya Pradesh, and Tamil Nadu, the allocation is universal at very cheap rates but under the Food Security Act, they have to identify (a lower number of) beneficiaries,” the minister said.

“States have also been asked to conform to the guidelines of identifying beneficiaries, computerise public distribution system and complete other formalities to implement the Act,” Paswan added.

The minister said the central government has been extending the deadline for implementing the Act.

The Act, brought in by the United Progressive Alliance, promises legal entitlement to rice at 3 rupees a kg, wheat at 2 rupees a kg and coarse grains at 1 rupee to two-thirds of the country’s population.

So far, only 11 states and union territories–Bihar, Chandigarh, Chhattisgarh, Delhi, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Punjab and Rajasthan–have rolled out the scheme.

Paswan said the government has ruled out increasing the per head allocation under the Act as of now, saying it will think along those lines only after the scheme is implemented in its entirety across the country.

It has also outright rejected the Shanta Kumar panel’s recommendation to trim targeted beneficiaries to 40% from current level of 67%, Paswan said.

Earlier this year, a panel formed to restructure the Food Corp of India, headed by former Food Minister Shanta Kumar, had recommended that the government should only allow 40% of the population to have access to subsidised wheat and rice to save the government billions of rupees in subsidy.

“As far as cutting down the beneficiaries to 40% of the population is Concerned, we have rejected it. But we are working on other recommendations like streamlining procurement operations, direct benefit transfer,” Paswan said.

The committee had also suggested aggressively rolling out food subsidy disbursal through direct cash transfers, starting with big cities and grain-surplus states where it would be easier.

The panel recommended allowing major wheat and rice procuring states to procure food grain on their own, without any help from the Food Corp.

“We are starting a pilot project on direct benefit transfer in Puducherry. And we have also accepted the proposal of allowing surplus states to procure on their own,” he said.

Shanta Kumar was entrusted the task of looking at ways to restructure Food Corp, the nodal food procurement agency, which was a key poll promise of the Bharatiya Janata Party.

Though the government has rejected unbundling of Food Corp, there are many other things that have been put right in the government’s first year of office, Paswan said.

The government reined in inflation, significantly cut grain damage, and improved storage facilities and the public distribution system, Paswan said, listing the government’s achievements in its first year.

The headline inflation rate, based on the Consumer Price Index is lower by over 350 basis points from a year ago, while that based on the Wholesale Price Index is firmly pinned in the negative territory. Among segments, food inflation has remained in check.

Paswan said the government will not let prices of wheat and rice increase, as it has enough stock to intervene in the market, if required.

“We have enough wheat and rice stocks and prices of those will not rise. And whenever we want we can release our stocks in the market,” the minister said.

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